Depression Conditions That Demand A New Deal Response

October 7, 2008

Isaiah J. Poole

The economy that conservatives until a few weeks ago were calling “fundamentally sound” is actually, in many respects, in the worst shape it’s been in since the Great Depression, according to a report by economist Charles McMillion. While the report primarily focuses on Michigan’s “eight-year depression,” it also presents a picture of the broader U.S. economy that explains why radically different economic policies are so desperately needed.

Among the findings in the report:

• The total number of U.S. jobs increased by only 4.1 percent from July 2000 to July 2008, the weakest eight-year period of job growth since 1930-1938. The loss of 3.8 million manufacturing jobs, a decline of 21.9 percent, is the worst on record.

• Total U.S. gross domestic product from the second quarter of 2000 to the second quarter of 2008 grew by only 18.8 percent, the weakest eight-year period of economic growth since World War II demobilization from 1945 to 1953, when growth was just 16.4 percent.

• Ratios of federal and household debt to GDP, to disposable incomes, net worth and every other financial indicator, have soared to far above any past levels even during World War II. Total federal debt soared by $4 trillion ($9.7 trillion) while household debt, including mortgages, rocketed by another $7.2 trillion (to $14.6 trillion). This combined $11.2 trillion in new debt stimulated just $4.4 trillion in nominal GDP growth and just 5.1 million in new U.S. jobs—or $2.2 million per job.

• Along with record debt levels, total U.S. household savings from current after-tax income have virtually disappeared. The total savings rate over the past eight years is just 1.3 percent; less than half the 2.9 percent average rate from 1929 to 1937. Over the past four years, the average savings rate is just 0.5 percent, about one-third of the 1.4 percent average rate even during the worst four years of the Great Depression.

These trends are magnified in Michigan, where offshoring in the automotive industry has led to the loss of 489,000 jobs in the state since 2000. Average annual compensation per job in the state has declined 33 percent, as manufacturing jobs have been replaced by lower-paying service jobs. The state has lost $8.6 billion of annual production to China.

McMillion concludes:

“Michigan’s worsening eight-year depression, the weakest overall U.S. economy in 55 years, and the unprecedented mountain of unsustainable debt accumulated in recent years demand forceful and immediate measures on the scale of those undertaken in 1933. Continued failure of political leaders to address these urgent matters with appropriate industry and trade policy actions could have lasting consequences for Michigan, for the U.S. and for the world economy.”

The government may stay open, but the fight continues against a GOP budget that wants to cut close to $3 trillion over 10 years from services for lower-income households to pay for tax cuts for the wealthy. The people say "Not one penny."

The Trump presidency, like a monster hurricane, is doing unprecedented damage to our democracy and to our progress toward being a nation that is more equitable and fair.

About Isaiah J. Poole

Isaiah J. Poole is communications director of People's Action, and has been the editor of OurFuture.org since 2007. Previously he worked for 25 years in mainstream media, most recently at Congressional Quarterly, where he covered congressional leadership and tracked major bills through Congress. Most of his journalism experience has been in Washington as both a reporter and an editor on topics ranging from presidential politics to pop culture. His work has put him at the front lines of ideological battles between progressives and conservatives. He also served as a founding member of the Washington Association of Black Journalists and the National Lesbian and Gay Journalists Association.